OTTAWA – The Canadian economy grew at a faster than expected pace in the third quarter, but economists cautioned Friday about the impact of lower oil prices on growth in the coming months.
Statistics Canada said the economy grew at an annualized pace of 2.8 per cent in the third quarter.
The jump in Canada’s gross domestic product was higher than the 2.1 per cent economists had expected, according to Thomson Reuters.
On a monthly basis, the economy grew in September by 0.4 per cent.
“This bounty of good news is almost precisely countered by the coming hit to incomes, government revenues, consumer prices and growth from sagging crude prices, which is a net negative for Canada overall,” Bank of Montreal chief economist Doug Porter wrote in a report.
“The good news is that the economy was in a surprisingly very good place heading into the energy price storm.”
Oil prices have plunged 30 per cent since the summer to their lowest level in four years taking the energy sector with it and prompting the federal and provincial governments to take a second look at their budgets.
Porter suggested the Bank of Canada, which had expected the pace of growth to come in at 2.3 per cent for the third quarter, will be unmoved by the better-than-expected performance by the economy because of the move in oil.
The central bank is widely expected to keep its key interest rate at one per cent when it makes its rate announcement next week.
TD Bank senior economist Randall Bartlett said the falling oil prices “remain a dark cloud on the horizon” and noted that lower profits in the oil sector will weigh on production growth and capital spending.
“TD Economics is of the view that oil prices will stabilize in the mid-to-low 70s in the first half of 2015, as current price weakness leads to production cuts in the global marketplace and some firming in demand,” he wrote in a report.
“In any event, with momentum in other sectors, Canada’s economy appears well-positioned to weather the storm.”
While growth in the third quarter was better than expected, it was down from the 3.6 per cent pace set in the second quarter.
Statistics Canada said real GDP was up by 0.7 per cent during the quarter ending September 30, after a 0.9 per cent increase in the previous quarter.
The agency said the growth was mainly the result of exports and household spending.
Household consumption was up 0.7 per cent in the third quarter. That was a slower pace than in the second quarter, when household consumption grew by 1.1 per cent.
Exports of goods and services slowed, rising by 1.7 per cent in the third quarter after a 4.4 per cent gain in the second quarter of the year.
Imports of goods and services were up 1.0 per cent in the third quarter after a gain of 2.4 per cent in the previous quarter.
Statistics Canada said there were gains in wholesale and retail trade, finance and insurance services, at the offices of real estate agents and brokers and in professional services.
It also said there were increases in the public sector, transportation and warehousing services, accommodation and food services.
In the United States, annualized GDP grew by 3.9 per cent in the third quarter.